China's No.1 and No.2 oil and gas producers, PetroChina and China Petroleum & Chemical Corp (Sinopec), reported third quarter net profit that beat estimates, as strong oil and gas production growth offset refining losses.

The Chinese government cut domestic fuel prices by about 3%, effective October 9th, leaving the refining business of state-run oil firms Sinopec and PetroChina in the red.

Analysts expect outlook for the two companies to be hampered by more refining losses due to the lower domestic fuel prices imposed by the Chinese government and a resource tax which will be levied nationwide next month.

"The impact from the fuel price cut on Sinopec will be comparatively smaller, because its refining operations are more efficient, while PetroChina will be affected more," said Yan Shi, a UOB Kay Hian analyst in Shanghai.

Sinopec's refining losses in the first nine months totaled 23.09 billion yuan, while PetroChina hit 41.5 billion yuan refining losses in the same period.

PetroChina earlier said its refining losses this year may reach 50 billion yuan if fuel prices stayed at their current levels for the rest of 2011, and it would also be burdened by higher taxes.

A nationwide resource tax on domestic sales of crude oil and natural gas will take effect on Nov. 1. PetroChina, Sinopec and CNOOC Ltd will pay a rate of 5% on oil and gas sales, rather than the previous quantity-based system.

PetroChina Co Ltd, the world's second-most valuable oil and gas producer after Exxon Mobil Corp , posted a net profit of 37.4 billion yuan ($5.9 billion) for the third quarter, up 7.9% on the third quarter last year, the company said.

Five analysts on average had forecast a profit of 34.1 billion yuan, according to a Reuters survey.

In the January-September period, PetroChina produced 670 million barrels of crude oil and 1.73 trillion ft³ of marketable natural gas, up 4.8% and 5.9% respectively.

Oil and gas production contributed more to the company's earnings, as crude oil prices in the third quarter were much higher than in the same period last year.

The company's crude throughput rose 10.3% to 725 million barrels in the first nine months, even though it was operating at losses.

Sinopec, Asia's top oil refiner, reported net profit of 20.22 billion yuan for the third quarter, up 3% from a year earlier.

The result compared with an 18.9 billion yuan estimate from five analysts polled by Reuters.

The oil refiner reported refinery throughput of 4.37 million barrels per day during the first nine months, up 3.6% from a year earlier.

Sinopec's natural gas output rose sharply by 22.1% to 382.3 billion cubic feet in the period, while crude oil output fell 3.6% to 239.56 million barrels due to maintenance in overseas fields, it said.